1. Value Added Tax (VAT)

(i) What is the due date for lodgment of a Value Added Tax (VAT) return?

VAT is due and payable;
(a) in case of a taxable supply by a taxable person in respect of a tax period, on the date the return for the tax period must be lodged (i.e. a taxpayer shall lodge a tax return for each tax period with the Commissioner General within fifteen days after the end of the period).
(b) in the case of an assessment issued under the VAT Act, on the date specified in the notice of assessment; or
(c) in any other case, on the date the taxable transaction occurs as determined.

When is a supply deemed to have been made for VAT purposes?

A supply of goods or services occurs
(a) where the goods are applied to own use, on the date on which the goods or services are first applied to own use;
(b) where the goods or services are supplied by way of gift, on the date on which ownership in the goods passes or the performance of the service is completed;
(c) in any other case, on the earliest of the date on which -
(i) the goods are delivered or made available, or the performance of the service is completed;
(ii) payment for the goods or services is made; or
(iii) a tax invoice is issued.
(2) Where -
(a) goods are supplied under a rental agreement; or
(b) goods or services are supplied under an agreement or law which provides for periodic payments,
the goods or services are treated as successively supplied for successive parts of the period of the agreement or as determined by that law, and each successive supply occurs on the earlier of the date on which payment is due or received.

What is VAT deferment?

Value Added Tax deferment is where the payment of VAT on importation of certain items of plant and machinery is postponed, to be recovered on the monthly VAT returns out of the taxable supplies made from the use of such an item of plant and equipment.

Who qualifies for VAT deferment?

VAT deferment is applicable to Plant & Machinery of chapters 84 and 85, plus some specialized equipment of chapter 87.05 of the harmonized system tariff book. The pre-condition for one to qualify for VAT deferment is that they ought to be a VAT registered business, and the equipment for which the deferment is sought shall be used in the production of taxable supplies and VAT returns filed accounting for the resulting VAT.
You can access the tariff book by visiting the EAC website at: www.eac.int follow the link – EAC Customs Union – down load Tariff book.

How can one access the ‘VAT deferment’ facility?

For you to access the VAT deferment facility you have to apply for it in writing to the Commissioner Customs or the Assistant Commissioner Trade stating the item(s) being imported on which VAT deferment is sought.
Once the Commissioner is satisfied that you qualify, deferment shall be granted.

Who should register for VAT?

Any person dealing or intending to deal in taxable supplies may apply to be registered for VAT. However, if the taxable turnover of the person, that is gross income for three consecutive calendar months, exceeds or is likely to exceed a quarter of the annual registration threshold; that person is obligated register for VAT.

Notwithstanding the foregoing, a person being a national, regional, local or public authority or body which carries on business activities shall apply for registration at the date of commencement of those activities.

What is the annual registration threshold for VAT purposes?

The annual registration threshold is fifty million shillings.

What does the word ‘Person’ mean in regards to VAT administration?

‘Person’ for VAT purposes is understood to include an individual, a partnership, company, trust, government, and any public or local authority.

When should a person register for VAT?

Except where the context otherwise provides, a person who is not already a registered person shall apply to be registered –
(a) within twenty days of the end of any period of three calendar months if during that period the person made taxable supplies, the value of which exclusive of any tax exceeded one-quarter of the annual registration threshold; or
(b) at the beginning of any period of three calendar months where there are reasonable grounds to expect that the total value exclusive of any tax of taxable supplies to be made by the person during that period will exceed one-quarter of the annual registration threshold.

Who is supposed to charge VAT on their supplies?

Only Taxable Persons who are registered for VAT shall charge VAT on all taxable supplies they make.

Who is a ‘Taxable Person’ in regard to VAT?

A Taxable Person is understood include –
(1) A person registered for VAT is a taxable person from the time the registration takes effect;
(2) A person who is not registered, but who is required to be registered or to pay a tax under the VAT Act, is a taxable person from the beginning of the tax period immediately following the period in which the duty to apply for registration or to pay tax arose.

Who should collect VAT?

Persons Liable to collect Tax include -
(a) in the case of a taxable supply, is to be paid by the taxable person making the supply;
Except as otherwise provided in the VAT Act, the tax payable –
(b) in the case of an import of goods, is to be paid by the importer;
(c) in case of an import of services, is to be paid by the recipient of the imported services.

What constitutes a taxable supply?

A taxable supply is a supply of goods or services, other than an exempt supply, made by a taxable person for consideration as part of his or her business activities.